GM's Channel Stuffing Goes To Germany: Is Europe's Largest Economy A Fraud?

We have long argued that auto manufacturers have been channel-stuffing (and subprime-lending) themselves back into a disaster and as such class-action lawsuits have begun. Recently we also pointed out the epidemic of dealer-inventory-stuffing in China (and again this morning the Chinese luxury car market's over-stuffing). So today's report from Reuters that German auto manufacturers have been stuffing dealer channels just like the rest of the world as Europe's largest car market is in recession even if few outside of the industry would know it. "Essentially, the carmakers are deceiving their shareholders, since they make it look as if the vehicles were actually sold. They want to pull the wool over their eyes," as three in every ten new vehicles in Germany are sold not to customers, but to carmakers and their dealers - a type of automotive industry pump priming known as "self-registration". At nearly half a million such registrations in the six months through June, the total is greater than the entire new car market in Spain. Is Germany's economy really what it is reported to be given all this fake demand pull-forward - or is it a total fraud?

So while official figures show a 0.7 percent rise in German car sales for the half year, figures from auto market research firms Dataforce and BDW Automotive show private demand fell 5 percent in the period, which would mean all the growth had been manufactured by the manufacturers.

Leaving dealers with major problems:

...manufacturers across the board are paying dealers cash bonuses that can be worth 3-4 percent of a vehicle's listing price to reach targets linked to the number of new cars registered as officially sold...

A tactic that can have a "devastating cost" for dealers, as they end up caught in a vicious circle:

"If you push at the end of one month, you start the next one in deficit because you've registered a car you still have to sell," he said. And when dealers can no longer keep it up, carmakers do it themselves. As a result, the two account for a combined 30 percent of the new car market, making the industry the second largest source of demand behind only private customers, who account for 39 percent.

and the reaction:

"It seems that people are burying their head in the sand."

but dealers end up footing the bill as:

"If employed over a long period of time, this is an enormous danger since they completely erode all pricing power, and manufacturers can no longer expect customers will pay more for a car in the future,"

which further distorts reality:

"If you stripped out those distressed vehicles registered only so they can gather dust on the parking lot of a dealer or manufacturer, then the size of the German new car market would have been below 3 million vehicles last year (instead of 3.17 million)," ZDK President Robert Rademacher told Reuters.

"And it's not only irresponsible but also counterproductive to use force to jam these vehicles down the market's throat, since it doesn't lead to higher sales in the end. It only creates distortions down the road."

and if Zee Germans are doing it, you can imagine the rest (who are in real trouble) are at it too:

"It's incredibly difficult getting statistics on what the number of self-registrations actually is. I don't know of any for Europe as a whole," said JATO's Hession, himself a former DaimlerChrysler sales planning manager.

but pleas to carmakers to "accept reality" and stop stuffing the market appear to be falling on deaf ears.

"We can only appeal to the reason of the manufacturer, something we do at every possible opportunity. But unfortunately reason is a rare commodity in this world,"

It's about time people, or "The Market" realize that the king without the clothes is not the EU, not the ECB, not Italy, France, Spain .. but Germany itself. Sadly, only a few seem to understand that Germany - and especially german people, are not doing that well. Rotting infrastructure, detoriarating financials .. just as it is in the Netherlands and Finland.

Looking at the GDP or the theoretical debt levels is nothing but deceit.

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Now that we have no accounting standards, does anyone believe the balance sheet at any company anymore?

Bonuses and Golden Parachutes for MBAs performing "liquidation" through "short-term-defrauded-metrics" is the "New Normal". These "executives" have no idea what their companies even *do* (e.g., how they "used-to" deliver value). The stock and bond markets are merely mechanisms to defraud people that thought they were "saving" and/or "investing".

What I find really interesting is that the Bloomberg link no longer works. This is why I always save the actual web page to my hard drive and then back it up.

Intelligence Czar Can Waive SEC Rules

Now, the White House's top spymaster can cite national security to exempt businesses from reporting requirements

President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye.

..............

AUTHORITY GRANTED. William McLucas, the Securities & Exchange Commission's former enforcement chief, suggested that the ability to conceal financial information in the name of national security could lead some companies "to play fast and loose with their numbers." McLucas, a partner at the law firm Wilmer Cutler Pickering Hale & Dorr in Washington, added: "It could be that you have a bunch of books and records out there that no one knows about."

The memo Bush signed on May 5, which was published seven days later in the Federal Register, had the unrevealing title "Assignment of Function Relating to Granting of Authority for Issuance of Certain Directives: Memorandum for the Director of National Intelligence." In the document, Bush addressed Negroponte, saying: "I hereby assign to you the function of the President under section 13(b)(3)(A) of the Securities Exchange Act of 1934, as amended."

A trip to the statute books showed that the amended version of the 1934 act states that "with respect to matters concerning the national security of the United States," the President or the head of an Executive Branch agency may exempt companies from certain critical legal obligations. These obligations include keeping accurate "books, records, and accounts" and maintaining "a system of internal accounting controls sufficient" to ensure the propriety of financial transactions and the preparation of financial statements in compliance with "generally accepted accounting principles."

What I find really interesting is that the Bloomberg link no longer works. This is why I always save the actual web page to my hard drive and then back it up.

Eek! Thought-crime in progress!

How can anyone fall for this laughable "National Security" lie/excuse/fantasy/bullshit/lie for every crime under the sun that's being committed by 'our' Govt, and their organised-crime enforcement syndicate?

'National Security' is possibly the greatest load of horseshit the powers that 'be', have ever dumped on the shoulders of humanity.

Popes used to control us with threats of eternal fire and brimstone, now Govt's trot-out this "National Security" arse, to scare us into compliance and submission instead.

That's interesting and I am a fan of yours and lots of others' comments.

Bear with me.

What SCOTUS also rules, in terms of gold, because at this point in life I define EVERYTHING in terms of gold, is that if you do not traffic [in anything] using the federal means of traffic [in anything], you are liable to whatever detriment to the federal govt. that would not be incurred otherwise.

Thus you would pay a toll for the federal highway that you bypass to avoid the toll, an extra tax on any profitable transaction in which federal government services are not a party to, and yes, you would be additionally burdened for using any other exchange medium than the US motherfuckin D.

SCOTUS just threw down the gauntlet before states like Utah, states that seek to unburden the individual in its exaltation of sound money and choice.

This effectively renders the gold suppression scheme as not a federal offense, however it may still be a civil one or perhaps a state one. However once this becomes clear, then we will see who wants to still be in and who wants to be out, and who wants to be out will have a hard time of it.

There will be war between US state factions before there is war in Iran. Hear me out. I've always surmised that with the paths of global interest intermingled and confused, and the US military in a constant state of churning force turnover on multiple, small fronts, how long until it is American interests fighting American interests first on foreign soil and then on native soil? We have already seen this happen - albeit in different time frames - that friendly foreigns become well-trained adversaries. This is our own strength used against us, however delayed through time. How long until that comes home to roost, descending like a huge black swan of unresolved implications?

a couple of my customers are GM suppliers and they have been warehousing alot of parts, yet when i asked the guy responsible for scheduling the presses why they keep running then, he told me because GM has the quantities on order.

all of my customers are busy beyond belief right now but they are in similar situations. it seems to me the supply chain too is being stuffed.

Exactly..if your an employee your job is only safe as long as you "produce"...it does not matter if its real or not...you get the pat on the back...let the others figure out the problems down the ladder...

Last week you had a humorous article about the laughter of ex Google and new Yahoo employee. I am now unable to access my yahoo account so am not enjoying the humour anymore. Has anyone on this blog developed similar problems?